Tuesday's Talking Green event hopes to get people out of "Wonderland"

Steamboat Springs  Trying to decide what the stock market may or may not do is a favorite American pastime. We spend hours searching for reason and understanding in order to provide a sense of confidence in our predictions or, even worse, to justify our assumptions.

Past Event

2013 was perhaps the easiest year of investing in my nearly 20-year career as a professional manager. Correctly positioned portfolios gained 15, 20 and even 30 percent without as much as a 5 percent dip despite all forms of worry, doom and gloom coming from the media. However, 2014 already is shaping up to be a little bit different.

I can feel that familiar nervousness and sense of wonder.

“Should I hold on for the S&P 500 to hit 2,150 as some suggest?"

“Or should I take profits now ahead of the next bear market?”

“It can’t keep going up like this, right?”

These are legitimate questions but of course only can be answered with perfect hindsight.

Instead of spending time and energy in “Wonderland," thinking about the future of the market, I suggest we focus on some easily recognized investment opportunities. There are too many to choose from to list here, but at 5:30 p.m. Tuesday, I will speak about this subject at the YVSC Talking Green event at The Paramount.

For now, let me give you a teaser by highlighting two high-level suggestions.

Stick with the leaders

You may not be aware, holed up here in our little "Wonderland" of Steamboat Springs, that since late 2012, world economies have been shifting into high gear responding to three key drivers of innovation and change. Growth now is accelerating in health care, technology and the Internet, biotechnology, clean energy, efficient transportation and several other select sectors.

2013 ushered in an awakening or revival of sorts for limelight game changing companies such as Netflix (+306 percent), Tesla Motors (364 percent), Solar City (403 percent), Amazon (60 percent), Hain Celestial (+71 percent) and Facebook (+109 percent). These companies have been in the news for their eye-popping returns, but their strength is even more indicative of larger trends now developing in response to the three global themes.

Thus far, 2014 is showing no signs of waning support for our leadership sectors, and investors would be wise to orient their portfolios accordingly.

Rebalance

Pull out your last investment statement(s) and take a good look at the percentage of your portfolio allocated to stocks (or stock funds) versus bonds, cash, commodities or other non–stock holdings. 2013 generated some enormous gains in stocks, specifically U.S. stocks, but little else. In fact, the majority of bonds, commodities and international securities, like emerging markets, lost money in 2013.

As a result, your stock position may have become an oversized portion of your total portfolio, meaning it’s time to rebalance it. For most, that’s going to mean selling some stock positions and buying some of those non-stock investments that lost money in 2013. This will look different for every investor as each investor has different objectives and risk tolerance. But adding a small portion of bonds to your investment portfolio now is a logical choice.

Commodities also are showing signs of life after nearly three years of declining values. These might be funds or securities in energy, basic materials, metals or agriculture. International funds are probably my least favorite option for rebalancing purchases, but they are attractively priced relative to U.S. stocks, especially emerging markets and Asian funds. Diversifying across asset types cuts your risk of loss if and when we see the next real decline in the stock market.

We can stay in "Wonderland" and hope the stock market does what we hope it will do, or we can be creative, taking this opportunity to orient toward game-changing companies while potentially (re)diversifing into other asset classes.

Sam Jones is president and chief investment officer for All Season Financial Advisors Inc.